Tanger Inc (SKT) 2016 Q3 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • - VP of IR

  • Good afternoon, everyone. This is Cyndi Holt, Vice President of Investor Relations, and I would like to welcome you to the Tanger Factory Outlet Centers third-quarter 2016 conference call.

  • Yesterday, we issued our earnings release, as well as our supplemental information package, and our investor presentation. This information is available on our investor relations webpage, investors.TangerOutlets.com.

  • Please note that during this conference call, some of the management's comments will be forward-looking statements that are subject to numerous risks and uncertainties, and actual results could differ materially from those projected. We direct you to our filings with the Securities and Exchange Commission for a detailed discussion of these risks and uncertainties.

  • During the call, we will also discuss non-GAAP financial measures, as defined by SEC Regulation G, including funds from operations, or FFO, adjusted funds from operations, or AFFO, same-center net operating income, and portfolio net operating income. Reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and in our supplemental information.

  • This call will be recorded for rebroadcast for a period of time in the future. As such, it is important to note that management's comments include time-sensitive information that may be accurate only as of today's date, October 26, 2016.

  • (Caller Instructions)

  • On the call today will be Steven Tanger, President and Chief Executive Officer; Jim Williams, Senior Vice President and Chief Financial Officer; and Tom McDonough, Executive Vice President and Chief Operating Officer. I will now turn the call over to Steven Tanger. Please go ahead, Steve.

  • - President and CEO

  • Thank you, Cyndi, and good afternoon, everyone. Tanger continued to produce strong growth during the third quarter of 2016, compared to the same period of last year. AFFO increased 5.1% to $0.62 per share, which was $0.03 above First Call consensus, and driven by lease termination fees, same-center NOI growth, and reduced expenses.

  • In addition, same-center net operating income was up 3.6% for the first nine months of 2016, compared to the same period of 2015. We have now posted same-center net operating growth in 52 consecutive quarters. Other key highlights for the quarter included starting construction of a new outlet center in Fort Worth, Texas, and a large expansion in Lancaster, Pennsylvania. And adding Tanger Outlet Savannah to our wholly-owned portfolio.

  • Our portfolio has very little exposure to reduced foreign tourism, caused by the strong dollar. We continue to maintain the lowest cost of occupancy in our peer group, which should help us increase rents over time.

  • Finally, our balance sheet remains a fortress, after converting $525 million from short-term floating rate debt to long-term unsecured fixed rate debt. Before I discuss our operating performance and our outlook for the balance of the year, I'll turn the call over to Jim, who will take you through our financial results and a brief overview of our recent financing activities. Afterwards, Tom will update you on our development activities. Go ahead, Jim.

  • - SVP and CFO

  • Thank you, Steve. Positively impacted by $46.3 million gain on our previously-held joint venture in the Savannah center, third-quarter 2016 net income increased 56.5% to $0.72 per share or $68.5 million, from $0.46 per share or $43.6 million for the third quarter of 2015. On a year-to-date basis, net income increased 63% to $1.76 per share to $168 million, from $1.08 per share or $101.9 million for the same period of last year.

  • As Steve mentioned, third-quarter AFFO per share was up 5.1% to $0.62 per share or $62.3 million, from $0.59 per share or $59.4 million in the third quarter of 2015. On a year-to-date basis, AFFO per share increased 7.3% to $1.76 per share or $177.5 million, from $1.64 per share or $163.3 million for the same period of 2015.

  • Tanger Outlet Savannah joined our wholly-owned portfolio on August 12, 2016, when the joint venture acquired our former partner's ownership interest. Serving the Savannah market since April 2015, Tanger Outlet Savannah is an upscale outlet shopping destination in Pooler, Georgia, which features more than 90 brand name and designer outlet stores. The property was 99% occupied on September 30, 2016, and is currently undergoing a second expansion to accommodate retailer demand for that space.

  • The transaction value of the Outlet Center had approximately $197 million, or a capitalization rate of approximately 5.9%, based on our 2017 forecasted property level net operating income, which excludes lease termination fees and non-cash adjustments, including straight-line and net above and below market rent amortization. The joint venture distributed all of the outparcels to our partner, as well as $15 million in cash consideration, which we funded under our unsecured lines of credit. We assumed the mortgage loans, which had an outstanding balance of $96.9 million at the time.

  • Effective as of the acquisition date, Savannah is consolidated in our financial results. Previously our legal interest had been 50% since the formation of the joint venture, which we accounted for under the equity method of accounting; however, due to preferred contributions we made to the joint venture, and the returns we earned on those contributions, our estimated economic interest in the book value of the assets was approximately 98%. Therefore, substantially all of the earnings of the joint venture were recognized by us as equity and earnings of unconsolidated joint ventures.

  • 2016 has been a whirlwind of financing transactions. As Steve mentioned, we have successfully executed a strategy to convert $525 million of floating rate debt to fixed interest rates since the beginning of the year, making our fortress balance sheet even stronger. In addition to reducing floating rate debt exposure, our most recent financing extended the average maturity of our outstanding debt from 4.5 years to 6 years, expanded our unencumbered asset pool from 85% from our consolidated portfolio square footage to 92%, and increased liquidity available under our unsecured lines of credit from 45% to 81%.

  • Since the beginning of the third quarter, we have completed two public bond offerings that raised $350 million of 10 year unsecured interest-only debt, at a low fixed coupon of 3.125%. The initial offering of $250 million of senior unsecured notes closed on August 8, 2016, and netted proceeds of approximately $246.7 million. We used the proceeds from this offering to repay mortgage loans totaling $160 million, unencumbering the newly-acquired Westgate and Savannah properties, and to pay down our unsecured lines of credit.

  • Subsequent to the quarter end, we reopened the 3.125% senior notes series September 2026, to issue an additional $100 million of senior unsecured notes. We completed the transaction on October 13, 2016, using the proceeds of approximately $97.8 million to pay down our unsecured lines of credit. Our total market capitalization as of September 30, 2016 was $5.7 billion, up 16% compared to September 30, 2015.

  • Our debt to total market capitalization ratio was 30%, down from 32% at September 30, 2015. We continue to maintain a strong interest coverage ratio during the third quarter of 4.48 times.

  • Looking back to the beginning of this year our floating rate exposure represented 36% of our total debt outstanding, or 12% of total market capitalization. On a pro forma basis, as if the follow-on $100 million bond offering had occurred on September 30, 2016, our floating rate exposure would have been $228 million, representing only 13% of our total debt, or 4% of our enterprise value. We have raised our dividend by 14% in April.

  • We have raised our dividend each of the 23 years since becoming a public company in May of 1993, and have paid a cash dividend for 93 consecutive quarters. Our dividend is well covered, with an expected FFO payout ratio for 2016 in the mid-50% range. At these levels, we expect to generate more than $100 million in excess cash flow over our dividend, which we plan to continue to reinvest in our business by upgrading our properties, and funding most of our development needs.

  • Our conservative mindset has served Tanger well throughout 35 years of economic peaks and valleys. Maintaining a fortress balance sheet and investment grade credit is our way of life. Financial stewardship is a hallmark of Tanger Outlets that we do not intend to change.

  • I'll now turn the call over to Tom.

  • - EVP and COO

  • Thank you, Jim. We remain optimistic about the future of the Tanger Outlet business. Our reputation with retailers, with having a quality portfolio of outlet centers, and our fine skill set for developing, leasing, operating, and marketing them, has afforded us a robust external growth pipeline.

  • In 2016, we will expand our footprint by 5%, by opening two new outlet centers. These two centers represent a combined total investment of approximately $185 million, with an expected weighted average stabilized yield of approximately 10.3%. Our net capital requirement for these projects is expected to be $137.5 million, of which only about $35.6 million remain to be funded as of September 30, 2016.

  • The first of these two centers opened 96% leased in the Columbus, Ohio market on June 24. Next month, we will open the newest Tanger Outlet Center in Daytona Beach, Florida. When complete, this 352,000 square foot wholly-owned center will feature over 80 brand name and designer outlet stores. Currently we expect to open the center approximately 95% leased on November 18, as planned.

  • During the third quarter, we commenced construction of a new wholly-owned outlet center in the Fort Worth, Texas market, and also a major expansion of our outlet center in Lancaster, Pennsylvania, both of which we plan to deliver in 2017. Combined, these 2017 projects represent a total investment of approximately $138 million, with an expected weighted average stabilized yield of 9.3%. Approximately $113.8 million remain to be funded as of September 30, 2016.

  • We acquired the land for our Fort Worth, Texas development on September 30, 2016, and held an official groundbreaking ceremony for the project on October 6, 2016. The center will be located within a Champion Circle mixed use development adjacent to Texas Motor Speedway.

  • Champion Circle is currently home to a Marriott Hotel and Conference Center, an 18-hole championship golf course, a Buc-ee's Mega Travel Center and over 200 residential units. Future expansion plans announced by the mixed used developer include up to 2 million square feet of office space, a large power center, and up to 680 additional residential units. Texas Motor Speedway hosts more than 1,300 events annually, including two NASCAR Sprint Cup race weekends, and one IndyCar Series race weekend. Currently, we anticipate a Holiday 2017 grand opening for this new 352,000 square foot outlet center, which will feature more than 80 brand name and designer outlet stores when complete.

  • In Lancaster, Pennsylvania, site work has begun on a major expansion that will increase the size of the center by 123,000 square feet, and add over 20 new brand name and designer outlet stores. Currently, we plan to complete this expansion during the third quarter of 2017. In addition, work is ongoing for other predevelopment stage sites in our shadow pipeline, which we plan to announce to upon successful completion of our underwriting process. Currently, we expect to continue to deliver on average one to two development projects annually.

  • I will now turn the call back over to Steve.

  • - President and CEO

  • Thanks, Tom. Blended base rental rates increased 20% during the first nine months of 2016, on top of a 24.5% increase during the first nine months of 2015. Lease renewals during the quarter accounted for approximately 1.056 million square feet, or about 74% of the space coming up for renewal, and generated a 16.7% average increase in base rental rates. Retenanting activity accounted for the remaining 368,000 square feet of executed leases, and generated an average increase from base rental rates of 28.4%.

  • With the lowest average tenant cost ratio among the high-quality mall REITs, at just 9.3% of our consolidated portfolio in 2015, we have been successful in raising rents, while maintaining a very profitable distribution channel for our tenant partners. Over the last several years, we have successfully implemented a leasing strategy to give tenants fewer and shorter renewal options, to increase the number of leases with annual rent escalations, and to convert pro rata cam to fixed cam.

  • Our rent spreads at lease expiration have narrowed slightly, as a result of our ability to capture base rent growth, and to increase cam reimbursements annually throughout the term -- throughout the lease term, rather than waiting until the end of the term. These embedded base rent and cam escalations during the term of our leases are key drivers of our same-center net operating income growth.

  • Same-center NOI increased 2.6% during the quarter, on top of a 3.3% increase from the third quarter of 2015. On a year-to-date basis, same-center NOI increased 3.6%, on top of a 3.9% increase for the first nine months of last year. In addition, portfolio NOI, or the consolidated portfolio rate, increased 6.1% and 6.9% respectively, for the third quarter and for the first nine months of 2016. Like same-center NOI, portfolio NOI is property level net operating income, excluding lease termination fees and non-cash adjustments like straight-line and net above or below market rent amortization.

  • Lease termination fees were approximately $1.5 million and $3.5 million respectively during the third quarter and first nine months of 2016, compared to $1.6 million and $4.4 million respectively during the first -- the third and first nine months of 2015. During the third quarter of 2016, traffic at several of our centers was negatively impacted by major weather events.

  • During August, our center in Gonzales, Louisiana was closed all or part of six consecutive days, due to devastating flooding, and subsequent curfews being enforced in the region. Hurricane Hermine negatively impacted seven centers over Labor Day weekend, including our locations in Charleston, South Carolina; two in Hilton Head, South Carolina; two in Myrtle Beach, South Carolina; Nags Head, North Carolina; and Savannah, Georgia. These eight centers comprised about what 20% of the total square footage of our consolidated portfolio. Despite a 2% decrease in traffic for these centers during the third quarter, our overall portfolio traffic was stable for the quarter, and excluding these centers, was up over 1%.

  • Price deflation remains prevalent in the apparel and shoe business, which make up a large percentage of the outlet industry. We do not have Apple or Tesla stores, nor do we have large department stores.

  • In this heavily promotional environment, average tenant sales within our consolidated portfolio were stable at $395 per square foot for the trailing 12 months ended September 30, 2016 excluding the eight weather-impacted centers. Including the weather-impacted centers, average tenant sales were $390 per square foot for the trailing 12 months ended September 30, 2016, down about 1% compared to the 12 months ended September 30, 2015, in spite of our comparable traffic being up for the same period.

  • Two new centers, Grand Rapids and Savannah, rolled into the consolidated portfolio average center sales per square foot metric this quarter. Initially, new centers do not typically exceed our portfolio average but in the first several years, have the potential for strong tenant sales growth. Westgate is a good example of this, having started out below our portfolio average in the first quarter of 2014, and growing to its current productivity, which is ranked in our top 10 centers.

  • Given these various headwinds, we are pleased that exclusive of the impact of these major weather events, tenant sales productivity has been in line with our initial guidance, which assumes stable tenant sales. In fact, a lot of tenants are posting strong year-to-date increases in our portfolio, including Elie Tahari, Theory, Francesca's, Columbia Sportswear, Converse, Van Heusen, Vans, Adidas, Nike, Vera Bradley, Movado, Calvin Klein, Kate Spade, Levi's, Michael Kors, Pandora, and many, many more.

  • Our consolidated portfolio was 97.4% occupied as of September 30, 2016, up 20 basis points from 97.2% on September 30, 2015, and up 50 basis points from 96.9% at June 30, 2016. Based on what we know today, we expect year on occupancy to be between 97.5% and 97.7%.

  • We are increasing our 2016 diluted net income per share guidance range to $2.02 to $2.06 per share, from $1.55 to $1.60 per share. This increase is primarily due to the large gain recognized on the Savannah transaction during the third quarter.

  • We are refining our FFO and AFFO guidance to a $0.04 range, and are raising guidance for each by one by $0.015 at the midpoint, driven primarily by better-than-expected results during the third quarter. We currently expect 2016 FFO to be between $2.33 and $2.37 per share, and AFFO to be between $2.34 and $2.38 per share. At the midpoint this range represents an AFFO growth rate of 6.3% compared to 2015, despite the $0.08 per share negative impact resulting from the sale of several non-core assets in late 2015 and early 2016. Excluding this dilutive impact, the midpoint of our new AFFO per share guidance range represents a 10% growth rate.

  • We are also raising our guidance for same-center net operating income growth by 5 basis points at the midpoint, to an expected range between 3.1% and 3.5% for the full year. This new range reflects slight outperformance of our forecast during the third quarter, but also takes into consideration the projected fourth-quarter impact of our planned remerchandising activity at a number of our centers, the bankruptcies of Aeropostale and PacSun, and the closure of all of the Jos. A. Bank's stores.

  • During the quarter, Aeropostale and PacSun bankruptcies, and the brand-wide Jos. A. Bank's closings resulted in 12 store closures within our consolidated portfolio, totaling only 41,000 square feet, or about 0.3% of consolidated square footage and 0.4% of our base annual rental revenue. As of September 30, our total consolidated portfolio exposure to these three tenants was 168,000 square feet, or about 1.4% of the consolidated portfolio square footage.

  • Based on what we know today, and subject to the final outcome of bankruptcy proceedings, we are projecting that we will recapture approximately 54,000 additional square feet, including 34,000 feet during the fourth quarter of 2016, and 20,000 square feet in the first quarter of 2017. The total additional space, which we currently expect to recapture from these tenants constitutes only about 0.4% of our consolidated portfolio, both in terms of square footage and annual base rental revenue.

  • The total space we expect to recapture related to bankruptcies and brand-wide store closings in 2016 is about 94,000 square feet, which is smaller than a single Macy's store, which have an average footprint of about 150,000 square feet. To further support this assertion, compared to 2016 expectations last year, we recaptured significantly more space related to bankruptcies and brand-wide store closings in 2015, about 157,000 square feet, and our occupancy is up, compared to a year ago.

  • Tanger's ongoing long-term strategy, to provide the consumer with the best overall shopping experience, so we strive to perpetually upgrade our tenant mix to position our centers for long-term net operating income growth. These store closings provide us with an exceptional opportunity to execute our strategy to release vacant space to better credit, higher volume tenants. The popularity of outlets with shoppers and our low cost of occupancy are attractive to retailers, which has kept our occupancy high throughout our history.

  • We are pleased with the settlements we have reached with bankrupt tenants in 2016, which are reflected in our revised same-center net operating income guidance. In negotiating these settlements, we took into consideration deal economics, sales performance, tenant mix, and occupancy on a center by center, lease by lease basis. While some of the stores have closed or are expected to close, and a few others will be granted short-term rent concessions, the remaining stores are expected to remain in place, with no change in rent.

  • Our forecast assumes tenant sales remain stable, exclusive of the projected net impact of Hurricane Matthew at seven Tanger Centers, each of which was closed between two to six days in October, due to weather and mandatory evacuation orders. Fortunately, our employees and those that work in retail stores at these centers were safe, and largely out of harm's way. Property damage was minimal, and we have adequate property insurance coverage.

  • Our estimates are based on average quarterly general and administrative expense of approximately $11.4 million to $11.9 million. Average projected management, leasing, and other service income of approximately $1 million per quarter, and do not include the impact of any additional bankruptcies or store-wide store closings, or brand-wide store closures, The sale of any additional outparcels, properties, or joint venture interests, or the acquisition of any properties, or any additional joint venture interest.

  • We remain optimistic about the growth prospects of our Company, as shoppers continue to seek Tanger's unique shopping experience and a wide array of brand name merchandise direct from the 80 to 90 manufacturers that operate stores in each Tanger Outlet Center. The tenant community continues to indicate its desire to expand into new markets within the profitable outlet channel, and with Tanger as a preferred partner.

  • The resiliency of the outlet channel has been proven over the 35 years, through many economic cycles. We have more than 3,100 long-term leases with good credit, brand-name tenants, that have historically provided a continuous and predictable cash flow, in good times and in challenging times. No single tenant accounts for more than 6.3% of our base, and percentage rental revenues or 7.6% of our gross leasable area.

  • In addition, approximately 91% of our consolidated portfolio square footage is unencumbered. Approximately 90% of our total revenues are expected to be derived from contractual base rents and tenant expense reimbursements.

  • Now, I'm out of breath, and I am happy to open the call for any questions that you may have. Operator, go ahead.

  • Operator

  • (Operator Instructions)

  • Todd Thomas, KeyBanc Capital Markets.

  • - Analyst

  • First question, for the space you recaptured this quarter, and what you expect to recapture over the next two quarters, how much of that has been released, and how much downtime do you anticipate for that space, that you'll be getting back?

  • - President and CEO

  • We tend to look at it as a total portfolio. Bankruptcies and store closings have been part of our -- part of the retail history, as far back one can remember. As I mentioned before, we're over 97% occupied now. And we were that way last year.

  • We had more store closures last year than we have this year. So we are in constant communication with a whole range of tenants to fill space. And I can't give you a space by space, tenant by tenant, but we have given you guidance that we expect to be between 97.5% and 97.7% occupied at the end of this year, which takes into account that turnover.

  • - Analyst

  • Okay, how long typically does it take to retenant that space? When you get that back.

  • - President and CEO

  • Fortunately, the bankruptcy proceedings take a long time. And we get sales reports from most of our tenants almost every month, so we know when a tenant is not performing well, and we can make plans accordingly. So we are in the process of releasing the space.

  • It could take anywhere from a week, Todd, if we have had the space released and the tenant goes in and takes occupancy to build out their store, to six months. It just depends on where it is and how much advanced notice we have.

  • But again, we look at cash flow we generate, our portfolio NOI is growing significantly, and we don't see any reason for that to stop. And our occupancy remains up. So this is part of normal process in any retail landlord's portfolio.

  • - Analyst

  • Okay, and then, as you look at the portfolio today, clearly there's a lot of demand from retailers for outlet space, and a lot of new entrants. But there have been some exits as well. In the past, over the last couple of years, there's been a handful, Jos. A. Bank now. Does it seem like there may be slightly higher turnover going forward perhaps, as retailers continue to retool their footprints and distribution channels a little bit?

  • - President and CEO

  • I don't think so. I think if you look at the tenants we had five years ago and 10 years ago, we couldn't build a center without Liz Claiborne as an anchor, and now Liz Claiborne is no longer a brand that is sold in retail stores. So it's just the normal evolution of retail brands. No brand is hot forever.

  • I think you can see in the Wall Street Journal today, that Apple has been one of the hottest, most popular brand names for many years, and now they don't seem to be as popular as they used to be. It's just the normal evolution.

  • Again, I don't want to be redundant Todd, but please look at the big picture of our portfolio, which remains 97.5% occupied. And by the way, we have never ended the year less than 95% occupied, in the 35 years we've been in business.

  • - Analyst

  • All right, sure. And just a quick last question for Jim. The FFO guidance increased $0.015 at the midpoint. Where are you running ahead, compared to your expectations? Was there anything specific that you can point to in the quarter?

  • - SVP and CFO

  • Todd, the biggest impact there was the lease termination fees that came in through the first nine months of the year, so that's built into our guidance. We're taking that into consideration.

  • A slight beat in our same-center NOI, but also taking into consideration that we are getting a little bit more stores back in the fourth quarter, some remerchandising activity we're doing, and being aware of the other hurricane that came through in October, Hurricane Matthew. So we're being, we think -- we're pretty comfortable with raising it by $0.015, and then we will see what happens.

  • - Analyst

  • All right, thank you.

  • Operator

  • George Hoglund, Jefferies.

  • - Analyst

  • Just based on your conversations with retailers, if you just think about current conversations, in terms of how many are actually asking for rent reductions or some lease amendment relative to last year, how does that seem on a year-over-year basis? Is it more or less? And also, does that seem to be currently accelerating or decelerating those discussions, relative to a quarter or two ago?

  • - President and CEO

  • As we mentioned before, bankruptcies and store closings this year are significantly less than they were in 2015. And we ended this year with our occupancy up, even after all those store closings, compared to last year. We don't get the sense that the bankruptcies are accelerating, and we don't get the sense that store closings are accelerating, just for that reason.

  • - Analyst

  • Thank you.

  • Operator

  • Jeremy Metz, UBS.

  • - Analyst

  • Steve, in terms of leasing, some of the folks that appear in your top tenants list have talked about impacts on their businesses from declining outlet traffic on some recent earnings calls. In your opening remarks, you talked about traffic being flat or up if we exclude some of the weather-related properties. So I was just wondering on the disconnect, is it a little more brand specific in your view, versus any overall issue with outlet traffic?

  • - President and CEO

  • I think it is brand specific. We have 425 or so tenants. I've told you that the traffic in our portfolio continues to show increases, even in spite of major weather events, non-recurring weather events, and evacuation orders. So we're very pleased that our aggressive marketing, through all different channels and social media is continuing to drive traffic.

  • Now, our job is to put traffic onto the sidewalks, and our tenants are very good at driving traffic from our sidewalks into their stores. Some obviously more successful than others. But the quick answer to your question is, it is brand specific, and I've given you our company traffic increases.

  • - Analyst

  • Okay, and just switching gears to the development pipeline. Tom, you had talked about a decently healthy shadow pipeline, which should result in one or two projects per year. This in line with some prior commentary you have talked about. You also kicked off the expansion at Lancaster. So as you look at the portfolio today, do you see additional opportunities to supplement that one to two ground-up projects a year with some additional redevelopment or expansion projects, on a more go-forward basis?

  • - EVP and COO

  • I think as we said consistently, we do project one to two a year. I don't see anything that would indicate that number should be greater or less than what we have committed to in the past. We're excited about the pipeline we have, but we think it will be one to two a year.

  • - Analyst

  • So one to two ground-up or expansion?

  • - EVP and COO

  • Right.

  • - Analyst

  • Okay.

  • - President and CEO

  • I just want to add to that the properties we opened this year, opened 95% leased. And the properties we opened last year opened 95% leased. This pretty extraordinary in retail development, or any type of development, to open day one with that high percentage of a leased assets.

  • - Analyst

  • Appreciate the color, thanks.

  • Operator

  • [Kristin Converse], Citi.

  • - Analyst

  • Steve, I just wanted to follow-up on a comment you made about granting short-term rent concessions to some of the bankruptcy tenants. Can you quantify what the impact of those concessions were in Q3? Did that flow into the re-leasing spreads that you post in your supplemental? And what exactly do you mean by short-term? Does it revert back to normal, or is it just a short-term lease?

  • - President and CEO

  • Let me try to answer one at a time. Any impact of any lease amendments is reflected in our comp NOI, so that is included in there. And the short-term nature, we take it store by store, property by property, tenant by tenant. And they vary all over the map.

  • It could be short-term for three months, it could be short-term for six months. But these are not long-term lease amendments. We're just trying to be helpful to some of our tenant partners, to get them through a tough time. But once they stabilize their business, we expect the rent to go back to normal.

  • - Analyst

  • They're reflected in your comp NOI, but if I look at the releasing spread numbers on page 11, in terms of the base trends, are they reflected in those releasing spreads?

  • - President and CEO

  • They are reflected through the end of the third quarter, and obviously through the year end, at the end of the year, it would be reflected in year end.

  • - Analyst

  • Okay. And then just I want to do follow-up on some of the comments you made on your efforts to boost cam and contractual rents. Your releasing spreads obviously are based on base rents. Do you have a sense for what you're spreads would be on a closed rent basis, so just thinking about if I include cam and get to a gross rent, what would be -- just to get a better sense for the total impact of those efforts? And then in the contractual rent, can you say what your increased contractual rents are, versus where you are signing new leases?

  • - President and CEO

  • We don't get that granular. I think you should look at the big picture of how we drive the business, and increase cash flow. We are driven by how much cash flow we can increase from the same square footage of our assets, and I think we're doing a pretty good job of that. And keeping our balance sheet a fortress. Whatever, it is all baked into the same comp NOI increased portfolio, NOI increases.

  • - Analyst

  • And then just maybe one last big picture one, just following the buy-ins of Westgate and Savannah. How are you thinking about maybe additional buy-ins of some of the other JV interest? Was there any other opportunities there, do you think?

  • - President and CEO

  • We are blessed with high-quality, very professional partners. Right now, we are not in any discussions to buy any additional partnerships, but business plans change over time. And we want to be opportunistic, buying in existing partnerships, you reduce the risk because obviously you know the property intimately.

  • And some of our partners' business strategy has changed, and wanted to monetize their investment. But our existing partners and ourselves have not had any discussions to change the partnership structure at this time.

  • - Analyst

  • Thank you.

  • Operator

  • Craig Schmidt, Bank of America.

  • - Analyst

  • I just wondered, beyond buying in JV partners, does there seem to be any opportunity for acquisitions beyond that?

  • - President and CEO

  • We constantly monitor any properties that are on the market for sale. We talk to the handful of properties that are in private hands, that we would like to own. But right now, we are not in any discussions, nor do we anticipate buying any centers.

  • - Analyst

  • Okay. And then a more general question. I realize, the devil is in the details. Is there generally an optimal size for an outlet shopping center? I'm just noticing that Fort Worth is opening around 352,000 and with the expansion in Lancaster is 364,000 and your average consolidated portfolio is about 364,000 as well. I just wondered if you had a sense there was, on average, an optimal size for a center.

  • - President and CEO

  • Craig, I think your analysis is correct. Our new centers are in the range of 350,000 square feet, which gives the consumer around 80 to 90 different world-class brand and designer names to choose from. And our strategy may differ from other developers, but we're comfortable with that size center being built. A lot of our centers have additional land that we can either turn into other uses, through outparcels, or expand the center, if it is successful over time.

  • - Analyst

  • Great, thank you.

  • Operator

  • Carol Kemple, Hilliard Lyons.

  • - Analyst

  • We were happy to see your occupancy grow from the second quarter, especially given the store closings that you all talked about. Can you name what retailers signed new leases during the quarter, and if you don't want to do that, what type of retailers they were? Apparel, footwear, housewares?

  • - President and CEO

  • Carol, thanks for commenting positively on the increase in our occupancy. We're very pleased with that, also. Fortunately, we execute leases with a range of tenants in almost all the categories you mentioned. Some designer apparel, some shoes, some actually jewelry, and some other uses.

  • So we have, in most of our centers when you're 97.5% or 97.4% occupancy, a lot of our centers are 100% occupied, with waiting lists. So we have a group of our leasing folks, who are talking to the best brands in the world, and we're fortunate to be able to have them come into our properties.

  • - Analyst

  • Okay, thank you.

  • Operator

  • Michael Mueller, JPMorgan

  • - Analyst

  • Steve, I may have gotten this wrong, but I thought I heard you say that as part of the Savannah transaction, that your partner got the outparcels; was that correct?

  • - President and CEO

  • Yes, that is correct.

  • - Analyst

  • And is that typically what happens, when you do a partner buy-out, where the partner will end up with that, or was this just different for some reason?

  • - President and CEO

  • This was different. Our partner was a highly skilled developer in the Savannah Atlanta market. And we had -- the size of the property was larger, the amount of acreage that he bought before he brought us in was more than we would normally buy. He is very adept and an expert at selling outparcels, so we used that as part of the currency, plus $15 million in cash to buy his interest.

  • And the sale of outparcels by our former partner helps both of us. It adds more life and traffic to the market, without distracting our leasing people from their goal of keeping the outlet center full.

  • Outparcel transactions, by their nature, take significantly longer to conclude than a lease in an outlet center. So we would rather focus our folks on generating as much cash flow as they can quickly, as opposed to diverting their attention to longer-term potential outparcel users.

  • - Analyst

  • Got it, okay. That was it. Thank you.

  • Operator

  • [Lawrence Filton, Balling, Schilling & Filton]

  • - Analyst

  • Steve, a question. Could you maybe talk about the trends in the outlets? Also, maybe, is there a trend in the outlets toward greater food, just like there is in the malls? And what are you doing to address that, if so?

  • - President and CEO

  • There is not a trend in the outlets for more food use, as there is in the malls. The highest and best use for our square footage, which as I mentioned earlier, about 350,000 square feet, is through retail tenants. They are the most stable, high-quality, good credit tenants.

  • We have food users spaced throughout the center, not necessarily in a food court, and our business is primarily Thursday through Sunday afternoon. And primarily lunch, and maybe an early dinner. So it's difficult for restaurants and food users to generate the volume that they need.

  • So it is not -- it's not proven to be a good use for our limited space. And that's our strategy, which may differ from the mall space. The malls which have, on average 900,000 square feet to fill, we have a different strategy.

  • - Analyst

  • Okay. And a follow-up question to one that was asked earlier about expansion possibilities, and talking about the ideal size of your centers. Some of your higher-end centers appear to potentially be able to support higher or more square footage. I'm thinking about the Mebane outlets, and the National Harbor potentially. Are there specific expansion possibilities in these higher productivity centers?

  • - President and CEO

  • There are small expansion possibilities in both Mebane, North Carolina, and National Harbor, which is outside of Washington. National Harbor, we are awaiting the opening of the MGM Casino, and we prefer to keep our space as close to 100% occupied as possible, and not overbuild. Mebane and National Harbor now are stabilized, high occupancy, high productivity centers, and we're exploring the option of expanding them at an appropriate time.

  • A good example is our large expansion in Lancaster, Pennsylvania. It is one of our highest productivity centers, and it allows the expansion at 122,000 square feet or so, allows us to further dominate the market and attract 20 to 25 more of the upscale tenants that will solidify our position.

  • So we constantly review every one of our properties, to see where expansion capacities might be. But we certainly don't want to overbuild.

  • - Analyst

  • Great, thanks.

  • Operator

  • There are no further questions at this time. I will turn the call back over to the presenters.

  • - President and CEO

  • I want to take the opportunity to thank everybody for participating in the call today, and your interest in Tanger Outlets. We look forward to seeing several of you, or all of you hopefully at REIT World, and at our upcoming non-deal roadshows. And come on down to Myrtle Beach, to Daytona Beach, Florida for our grand opening in a couple of weeks. Thank you all. Goodbye.

  • Operator

  • This includes today's call. You may now disconnect.